"We have had queries from our own members on this exact topic. "There is a little-known clause in the Employment Relations Act that allows for an employee's salary to represent 'total remuneration' for the role they perform.
"Should that employee decide to join KiwiSaver, the cost of the employer's contribution will come directly from the employee's pay.
"The other option employers have is the 'pay + benefits' approach to remuneration where the employer's contribution is paid on top of an employee's pay.
"If an employer wishes to adopt the 'total remuneration' approach, there is still the requirement to negotiate in good faith with the employee.
"The Individual Employment Agreement must include a clause detailing the 'total remuneration' which accounts for the amount of the employer's contribution (if any).
"An employer cannot simply adopt this as a matter of policy going forward," says Raynes.
As Raynes says, the rules on total remuneration have flip-flopped since KiwiSaver began.
When it was launched in 2007 total remuneration was allowable, the rationale being that those in KiwiSaver did not gain any salary advantage over a co-worker who, for whatever reason, chose not to be in KiwiSaver.
The following year the Labour-led government reversed this decision, but after the election that same year the National-led Government reinstated total remuneration.
Total remuneration packages that deduct employer contributions from the employee's gross pay must have been entered into on or after December 13, 2007.
There has been a court case challenging total remuneration taken by care home workers on the minimum wage.
A year ago the Court of Appeal ruled that total remuneration cannot be built into the pay for those on the minimum wage, where the effect would be to take that wage below the statutory minimum - currently $14.25 an hour.
"In regard to PAYE tax, your employee contributions are calculated on your gross income but deducted from your net income (after PAYE has been deducted)," says Raynes.
"This means the amount of PAYE tax you pay doesn't change because of KiwiSaver.
"Employer contributions, on the other hand, are not subject to PAYE but since April 2012 have had Employer's Superannuation Contribution Tax (ESCT) deducted.
"The amount of ESCT payable varies depending on your income.
"If you are unsure which method your employer uses for employer contributions, I'd suggest asking your employer to clarify or have a look at your employment agreement," Raynes says.
Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.
To have your KiwiSaver questions answered by the NZ Herald's panel of industry players email Helen Twose, helentwose@gmail.com.
